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How to avoid getting nailed with legal liabilities when hiring a contractor

Do your homework before hiring a contractor to handle a home remodeling project. For most of us, the home is the single biggest investment of a lifetime. Consequently, it "makes dollars and sense" to hire a competent contractor who can add value to your investment by adding a bedroom, remodeling your kitchen or bathrooms, or handling a similar undertaking, says Lemuel Dowdy, staff attorney for the Federal Trade Commission (FTC), in Washington, D.C.

"Why run the risk of paying for a costly home improvement project that triggers complications such as legal entanglements, insurance issues, project cost overruns or shoddy workmanship?" asked Dowdy.

"Before selecting a contractor, take a look at some important insurance issues," emphasizes American Insurance Association ("AIA") spokesman Sean McManamy. "You should always verify that the contractor carries workers' compensation coverage. If a contractor does not have workers' compensation coverage, workers who are injured while working on your home could sue you."

McManamy also suggests that homeowners "ask to see a copy of the contractor's workers' comp policy and ask the same of any subcontractors such as electricians and plumbers. Make sure that all of the contractor's employees are covered - even those who are part time."

Dowdy advises consumers to "get the contractors' and subcontractors' insurance policies numbers and check to see that they're still in effect. That's all part of doing your homework in the pre-hiring phase."

One more insurance note from McManamy, AIA director of public affairs in Chicago, " ... increase homeowners policy limits if you're building an addition to your home, because your home is now more expensive to rebuild in the event it is destroyed by a covered peril such as fire or wind," says McManamy.

Fireman's Fund Insurance Co. spokesman John Kozero believes it's important to notify "your insurance representative about your plans. Your insurer's advice could turn up additional precautions for preserving your property and guarding against liability claims."

National Association of Home Builders ("NAHB") spokesman Sean Downey advises homeowners to check the contractor or remodeler's credentials. Said Downey: "That could include whether the contractor or remodeler is a member of a construction trade group" -- and whether he or she is licensed or bonded.

"Look for simple things like, does a remodeler have an established presence in the community, with a permanent mailing address and phone number along with a verifiable references," says Downey, Communications Manager with NAHB, a trade organization based in Washington, D.C.

Downey advises homeowners to check the contractor or remodeler's credentials. "That could include whether the contractor or remodeler is a member of a construction trade group, and whether he or she is licensed or bonded," said Downey.

To avoid problems stemming from home remodeling projects, consider tips from Sheila Adkins, Associate Director of Public Affairs for the Council of Better Business Bureaus ("BBB"), in Arlington, Va. "It is very important to compare costs before committing yourself financially toward any home improvement project, whether it's remodeling your kitchen, or an even more expensive project," says Adkins.

In addition, Adkins advises consumers to "seek at least two or three written bids from prospective contractors." Bid particulars should include: building specifications (such as what is being remodeled and to what extent), materials, estimated labor costs, and projected time needed to complete the project, Adkins said.

The BBB urges consumers to verify a contractor's local references. "Thoroughly check out his or her references," says Adkins. "Be sure to check with your local Better Business Bureau to see if there have been any complaints lodged against your contractor."

California homeowner Pamela Ohlsen hasn't always gathered multiple bids on various remodeling projects. "It cost me when I didn't do my homework a few years ago in hiring a contractor to redo one of my two bathrooms. Without checking references, I hired a handyman based on a friend's recommendation, and it didn't work out. The guy hired a subcontractor who put in tile in the shower before the new pipes were put in, so that meant that it all had to be ripped out and reinstalled. I had the guy redo that whole thing. It didn't cost me more money, but it was very upsetting."

Ohlsen learned a lesson. "Since then," she said, "I've only used licensed contractors, and I've checked their references to make sure they had done good work in the past. Before hiring the contractor who remodeled both my kitchen and fireplace not too long ago, I went to see some of his work at other homes in the neighborhood to make sure there was good workmanship and customer satisfaction."

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